FM hints at extension of loan repayments by industries facing Covid-19 stress

The government is in talks with the Reserve Bank of India to allow borrowers facing financial stress due to Covid-19, put-off their loan repayments further than August 31.

Union Finance minister Nirmala Sitharaman Friday said her ministry and RBI are also working on loan restructuring for certain sectors such as hospitality, which is facing one of the biggest challenges amid the pandemic.

Restructuring is modifying the terms of the loan. Banks resort to it save borrowers from being declared defaulters and, loans from being classified as NPAs.

"I fully understand the requirements of the hospitality sector on the extension of the moratorium or restructuring. We are working with RBI on this," she said addressing members of the industry chamber Ficci.

India’s nearly $250 billion hospitality industry, which contributes over 9% to the country’s GDP and provides jobs to over 40 million people, is staring at a revenue decline by Rs 90,000 crore in 2020, according to industry estimates.

The hospitality sector is also the third-largest foreign exchange earner in the country.

Addressing concerns of MSMEs, Sitharaman also said banks cannot refuse credit to MSMEs covered under emergency credit facility.

"If refused, such instances must be reported. I will look into it," she said.

On the infrastructure finance issue, the finance minister said work is on setting up the development finance institution, however, what shape it will take will be known shortly.

Her remark came days after RBI Governor Shaktikanta Das asked industry to find new ways to fund infrastructure projects as banks struggling with bad loans may now find it difficult to fund those.